I Love 33:1 Leverage – BIS
Courtesy of Karl Denninger at The Market Ticker
Amusing news here out of BIS….
When it comes to the calibration, the Committee is proposing to test a minimum Tier 1 leverage ratio of 3% during the parallel run period.
Ah, now that’s nice. How do we get that sort of leverage ratio being "allowed"? I wonder if Germany’s banks might have something to do with that….
I’ve read the entire report; Bloomberg has a "sanitized" version is that is mostly ok in it’s interpretation – the key point being:
July 26 (Bloomberg) — The Basel Committee on Banking Supervision softened some of its proposed capital and liquidity rules …..
Right.
Someone needs to tell these clowns that both Lehman and Bear blew to the sky with leverage ratios around 30:1, and that their "proposal" allows more than double the former legal limit for investment banks in the US (before Hanky Panky Paulson got the SEC to remove the limit, of course.)
I suppose we need another global financial detonation before people start taking the words "leverage" and "reserves" seriously. Heh, you all know my view on this: One Dollar of Capital.
But if you do that, you have banks that are clearing agents for the economy and utility providers of credit, with each dollar of risk they take being pre-funded by an equity or debt purchaser who stuck THEIR money into the pot, knew they could lose it, and will demand a REASONABLE return.
That is, banks would be stodgy businesses again that paid out most of what they earned in dividends, and that would typically be 5 or 7% a year – and that’s it.
The common bankster’s salary would be a middle-class wage in the middle of America – a middling-five-figure number.
And the looting of the world’s commerce through finding some way to skim off a piece of each and every transaction, amounting in the totality of the marketplace to a colossal tax of well over a trillion dollars in the United States alone each and every year, would end.
